fedgazette

Profile of a gambling district

We love to gamble, and we've developed dozens of ways to do it

Douglas Clement - Editor, The Region

Published March 1, 2003  |  March 2003 issue

Gambling differs dramatically among the Ninth District states, both by type of gambling and level of expenditure. Surprisingly, per capita gambling expenditure seems to be highest in two district states with relatively low per capita income. Very rough estimates for 2000 indicate that South Dakotans spent almost $400 a year per capita on gambling, nearly twice as much as citizens of higher-average-income Wisconsin ($210). Similarly, Montanans gambled away $341 per person in 2000, 30 percent more than Minnesotans ($262), even though per capita income is 35 percent lower in Montana.

Residents of North Dakota, a low-income state, currently gamble less per capita ($180) than other district states, and less than the national average of $222 per capita.

Another major difference in district gambling is the size of the Indian casino industry in each state. Wisconsin, Michigan and Minnesota have numerous Indian casinos and high total gambling expenditure at them. Accurate data on Indian casino revenues are difficult to obtain because tribal owners have confidentiality agreements with the states in which they're located, but rough estimates put 2000 revenues for Indian casinos in each of those three states at between $850 million and $900 million. The tribal casino industry is much smaller in North Dakota, South Dakota and Montana, where 2000 expenditures were roughly $40 million, $26 million and $6 million, respectively. (See "Milking the new buffalo.")

State by state

There is wide variation among states in the shares of gambling dollars spent on different types of gambling. The biggest share of Wisconsin betting dollars goes into Indian casinos (nearly 80 percent), but the second largest portion, 15 percent, goes to the lottery. The rest is split mainly between charitable gambling (bingo and raffles) and parimutuel racetrack betting, though both are declining markets, and both blame Indian casinos for putting them out of business.

South Dakotans devote 68 percent of their gambling dollars to the lottery—far more than any other state in the district—but just 4 percent of that goes to "traditional" lotteries like lotto and scratch-off tickets. The name of the game in South Dakota is video lottery: 8,000 video gambling devices—essentially electronic slot machines—spread across the state in bars and lounges. South Dakotans love them; the video bandits took in about $557 million in 2000, and gave back $363 million in prizes, a 65 percent payout. The other big story in South Dakota is Deadwood, which resurrected its historic downtown with mini-casinos filled with similar video gambling machines. About 17 percent of South Dakota gambling monies are spent there.

Montana is different yet similar. As in South Dakota, traditional lottery is small potatoes, accounting for just 5 percent of total consumer gambling expenditure. But here too, video gambling machines are hugely popular, accounting for almost 90 percent of gambling expenditure. But in Montana, VGMs are not part of the state lottery; they're privately owned and operated in mini-casinos that sell liquor, gas and food, and the state licenses and taxes them.

Minnesotans spend 67 percent of their gambling dollars at Indian casinos but just 11 percent on lottery tickets, even though the payout ratio (prizes to net income) is slightly higher than in Wisconsin. In Minnesota, pulltabs are a comparatively big game. In fact, Minnesotans spend more than twice as much on pulltabs as residents of any other state in the nation, almost $1.4 billion in 2000. (The nearest runner-up, Ohio, spent under $600 million.) Prizes paid back were about 82 percent of that, leaving a net consumer expenditure on pulltabs of almost $250 million, more than the net amount (after prizes) that Minnesotans wagered on the lottery, horse and dog races, and charitable bingo combined.

And in (pre-lottery) North Dakota, charitable gambling is big. Nearly half of gambling wagers go to charitable games, including about $34 million in pulltabs in 2001, $10.6 million on bingo and $5.6 million on blackjack card games sponsored by charities and held in bars. While the Indian casino industry is small in North Dakota relative to other Ninth District states, it accounts for over a third of gambling expenditure in the state. About 18 percent of gambling funds go to parimutuel racing, and fans are looking forward to a new racetrack soon to be built in Fargo. Once the lottery starts up, of course, that overall picture may change.

Getting a grip

Gambling expenditure is sometimes reported as the gross "handle" (the total amount of money that bettors put on the table). State lotteries, for example, often advertise the hundreds of millions wagered each year. But industry experts measure consumer expenditure on gambling as the handle minus prizes paid back to bettors. If you buy $10 worth of lottery tickets and win $2 back, you've spent $8 on gambling, not $10. In these fedgazette articles, gambling expenditure is reported as this net-after-prizes figure, unless otherwise noted.


Related stories:
Tribal Economic Development, March 2006

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